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A tentative rebound in resource stocks points to a positive start to Australian trade after two days of heavy losses.

ASX SPI200 index futures rallied 37 points or almost 0.6 per cent to 6709 in a sign the local market may have overshot to the downside. The ASX 200 tanked 50 points or 0.7 per cent yesterday to extend its two-day deficit to 141 points as the market was battered by doubts over a US-China trade deal and tumbling bank stocks.

Overnight, US stocks closed lower for a third day as investors digested conflicting headlines on trade. The S&P 500 dipped five points or 0.16 per cent. The Dow gave up 55 points or 0.2 per cent and the Nasdaq 21 points or 0.24 per cent. The three-day decline is the S&P 500’s longest losing run since September.

Investors appeared to be suffering from ‘headline fatigue’ following another 24 hours of contradictory reports on the prospects for a trade deal. China warned that a US bill in support of Hong Kong will add a fresh impediment to a successful outcome if President Donald Trump signs it into law, as expected. China’s Foreign Minister said the relationship “has reached a critical crossroads”. ¬†Separate reports said China had invited US negotiators to Beijing for talks, and the nations were “on the doorstep” of a deal, according to a White House source.

Energy was the best of the US sectors as oil hit a two-month high. A Dow Jones index of oil and gas stocks rose 1.6 per cent. Brent crude settled $1.57 or 2.5 per cent ahead at $US63.97 a barrel on reports that OPEC – the Organization of the Petroleum Exporting Countries – is likely to extend existing caps on crude production until the middle of next year. An OPEC source said Saudi Arabia wants to support the oil price until it floats shares in state oil corporation Aramco.

Australian stocks tumbled yesterday after Trump told reporters China “isn’t stepping up to the level we want” in trade negotiations. Bank stocks hit multi-month lows after regulators accused Westpac of failing to comply with anti-money laundering legislation. Asian markets also took a hit. The Shanghai Composite shed 0.25 per cent and the Hang Seng 1.57 per cent.

The mood towards resource stocks improved overnight, with BHP and Rio Tinto finishing ahead in US action after declining in the UK. BHP’s US-listed stock put on 0.2 per cent after a 1.21 per cent fall in its UK-listed stock. Rio Tinto gained 0.34 per cent in the US after losing 1.18 per cent in the UK. The mixed session followed an eighth straight improvement in the price of iron ore. The spot price at Tianjin edged up 20 cents or 0.2 per cent to $US86.85 a dry ton.

The gold market appeared more optimistic than share investors about the prospects for a trade deal. Gold for December delivery retreated $10.60 or 0.7 per cent to $US1,463.60 an ounce in a sign of weakening demand for havens.  

Most  industrial metals retreated in London as traders focussed on the negative impact on trade talks of proposed US legislation in support of Hong Kong. Copper declined 0.8 per cent, aluminium 0.3 per cent, lead 0.3 per cent, and zinc 0.6 per cent. Nickel was bid up 0.5 per cent. Tin put on 1.8 per cent

The dollar fell a quarter of a cent to 67.86 US cents.

A round of manufacturing updates from around the globe starts with Australian data at 9am EST and concludes tonight with reports from Europe and the US.

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